Let’s clear something up about the real estate market: it’s not as simple as good or bad. Many people new to real estate investing mistakenly look at the market as one big entity, saying things like “the market is booming” or “the market is in a slump”. While these broad trends are important, they only tell a small part of the story.
Recently, an investor came to me worried about investing in a new construction project. They’d heard that new construction was on a downswing and didn’t want to get caught in a bad deal. But here’s the thing: the real estate market doesn’t behave the same everywhere, and not all new construction is equal.
I explained to the worried investor that real estate is unique to each area and deal. Each location has its own character, defined by the popularity of the neighborhood, home prices, and quality of the homes. In the case of this project, we were looking at building a high-end, custom home in a desirable neighborhood, which made it a promising prospect.
So, how can an investor cut through the complexity of the real estate market? It’s all about getting specific. Don’t just look at the market from a high-level perspective. It’s good to know how the national economy, the stock market, and unemployment rates might influence the housing market, but successful investing requires a closer look.
When you’re considering an investment, take a look at the properties that have sold and are currently for sale in that same neighborhood. Pay attention to the style, layout, design, and location of these properties. In the case of our new construction project, we studied not just the larger neighborhood, but the specific street where we planned to build, using recent sales in the area to guide our decision-making process.
Remember that the real estate market represents many territories and sub-markets, and each one appreciates and depreciates depending on its current trend pattern. When deciding to invest, it’s important to perform due diligence and pay attention to the local market.
To wrap up, successful real estate investing relies on understanding the specifics of your chosen market – right down to the street level. Real estate isn’t just about location – it’s about understanding the right location.
